1. The Kindle Fire is much cheaper than its competitors and consumers understand they're getting value for money.

A tablet that's slightly clunkier than the iPad at 40% of the price is an excellent value (see price comparison chart above, from Evercore Partners). What's more, consumer surveys we've studied suggest there is enormous pent-up demand for tablets. There are millions of people who desperately want to buy a tablet, but want it to be cheaper and from a brand they trust (see chart at right). That's exactly what Amazon delivers. And judging by the explosion of pre-orders, our prognostication of pent-up demand for a good media tablet at that price-point was right. Jittery scrolling may make gadget reviewers snort, but millions of regular people understand that at $200 it's a great value.

The first Kindle was big, ugly, clunky, and retailed for $400. It sold out. More importantly, the Kindle got better and better (and cheaper and cheaper) so that now it fits in a pocket and sells for $80. Amazon's long-term goal with its tablets is to build a deep ecosystem to distribute media and generate ecommerce sales. From the point of view of the future of the Kindle ecosystem, what the Kindle Fire is like today matters much less than what it will be like 3 years from now. And given both the history of the Kindle e-reader and the fact that the first-generation Fire is a not-great-but-solid device, everything seems to point in the direction of Amazon having outstanding tablets not long from now.

THE BOTTOM LINE: We don't see the bad reviews affecting Kindle either in the short term or the long term. Short term, the rough edges are no big deal because consumers understand that the Kindle Fire delivers excellent value for money at $200. Long term, the devices will only get better (and probably cheaper, too). The Kindle Fire remains, in our view, a game changer.